Running head: GAP ANALYSIS: LESTER ELECTRONICS
Gap Analysis: Lester Electronics
Reba Gaines
University of Phoenix
Gap Analysis: Lester Electronics
In 1978 Lester Electronics, Inc. (LEI) and Shang-wa Electronics entered an agreement where Shang-wa Electronics granted, Lester Electronics exclusive rights to sell Shang-wa Electronics's capacitors in the United States for 65 years with a condition that LEI sustain a minimum yearly purchase of $1 million dollars. In exchange, Shang-wa Electronics could not sell its capacitors to anyone purposing to market them to United States buyers and as a result, Shang-wa is Lester’s primary supplier of capacitors for the U.S. market. (University of Phoenix, 2007).
For the past 35 years, the agreement has performed well for both companies. Both companies have interests in future growth opportunities that could position each to meet the continual growing demands of the industry. Nevertheless, Mr. Lin retirement is on the horizon and he seeks to enter into a joint venture with LEI hoping to leave his empire in good hands. For LEI, this is a great opportunity to become a global company. Mr. Lin also feels compelled to sell to Transnational Electronics Corporation (TEC) who has expressed an interest in purchasing Shang-wa out right (a takeover). Avral Electronics has expressed interests in purchasing Lester Electronics as well.
This purpose of this paper is to describe the situation concerning the financing problem facing LEI and Shang-wa along with the challenges and opportunities that exists, as well as potential solutions. The paper will further define the end-state goals to be attained related only to the financing focusing on long-term debt to equity mix as opposed to any a boost in net worth.
Situation Analysis
Issue and Opportunity Identification
The entire scenario outlined suggests financial problems for both companies. For LEI, if Shang-wa is purchased by TEC, the long standing...